Spain hopes banks will need 'a lot less' than 15 bn euros

6th July 2011, 0 comments

Spain hopes its savings banks will need "a lot less" than the maximum estimate of 15 billion euros ($21 billion) in new capital to put them on a sound footing, Finance Minister Elena Salgado said Wednesday.

Madrid hoped the banks would require "in the area of half" of the top estimate of 15 billion euros to bolster their balance sheets by September in line with new capital requirement rules, she said in an interview with AFP.

Spain's lenders, especially regional savings banks that account for about half of all lending in the country, have been heavily exposed to bad debt since the collapse of the property sector at the end of 2008.

The Bank of Spain has estimated the entire banking system requires no more than 15.15 billion euros to recapitalise.

The extra money is required to meet stringent new rules on capital levels introduced by the Spanish authorities so as to regain credibility on world financial markets.

Under the new rules, Spain requires banks to boost their rock-solid core capital to 8.0 percent of total assets if they are listed, and to 10 percent if they are not listed.

Those that fail to find the money will get an injection of public funds in September.

Even if every Spanish bank was obliged to meet the strictest 10-percent requirement, the maximum funds required would be 15 billion euros, Salgado said.

"But we already know that in no way will it go over that figure and it will be a lot less," she added.

Asked whether Madrid hoped the total figure would be half of the 15-billion-euro maximum, or even less than half, she replied: "In the area of half."

Salgado said it was too early to give an exact figure.

"The savings banks might be telling us that conversations with the private sector are going well but until the private capital actually comes in, it would be premature to give (the figure), of course."

Salgado said Spain's largest savings bank group, Bankia, provided a good example of banks tapping the private sector.

Bankia last week said it planned to raise up to 4.58 billion euros ($6.6 billion) via a listing of nearly half of its business on the stock exchange on July 20.

Bankia, the product of a merger last year of seven regional savings banks led by Caja Madrid, said in January it would list on the stock market as a way to meet higher capital requirements for the Spanish banks.